Related provisions for PERG 2.10.1

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SYSC 2.1.4RRP

Allocation of functions

This table belongs to SYSC 2.1.3 R

1: Firm type

2: Allocation of both functions must be to the following individual, if any (see Note):

3: Allocation to one or more individuals selected from this column is compulsory if there is no allocation to an individual in column 2, but is otherwise optional and additional:

(1) A firm which is a body corporate and is a member of a group, other than a firm in row (2)

(1) the firm's chief executive (and all of them jointly, if more than one); or

the firm's and its group's:

(1) directors; and(2) senior managers

(2) a director or senior manager responsible for the overall management of:

(a) the group; or(b) a group division within which some or all of the firm's regulated activities fall

(2) An incoming EEA firm or incoming Treaty firm (note: only the function in SYSC 2.1.3 R (2) must be allocated)

(not applicable)

the firm's and its group's:

(1) directors; and (2) senior managers

(3) Any other firm

the firm's chief executive (and all of them jointly, if more than one)

the firm's and its group's:

(1) directors; and (2) senior manager's

Note: Column 2 does not require the involvement of the chief executive or other executive director or senior manager in an aspect of corporate governance if that would be contrary to generally accepted principles of good corporate governance.
SYSC 2.1.6GRP

Frequently asked questions about allocation of functions in SYSC 2.1.3 R

This table belongs to SYSC 2.1.5 G

Question

Answer

1

Does an individual to whom a function is allocated under SYSC 2.1.3 R need to be an approved person?

An individual to whom a function is allocated under SYSC 2.1.3 R will be performing the apportionment and oversight function (CF 8, see SUP 10.7.1 R) and an application must be made to the FSA for approval of the individual before the function is performed under section 59 of the Act (Approval for particular arrangements). There are exceptions from this in SUP 10.1 (Approved persons - Application).

5

2

If the allocation is to more than one individual, can they perform the functions, or aspects of the functions, separately?

If the functions are allocated to joint chief executives under SYSC 2.1.4 R, column 2, they are expected to act jointly. If the functions are allocated to an individual under SYSC 2.1.4 R, column 2, in addition to individuals under SYSC 2.1.4 R, column 3, the former may normally be expected to perform a leading role in relation to the functions that reflects his position. Otherwise, yes.

3

What is meant by "appropriately allocate" in this context?

The allocation of functions should be compatible with delivering compliance with Principle 3, SYSC 2.1.1 R and SYSC 3.1.1 R. The FSA considers that allocation to one or two individuals is likely to be appropriate for most firms.

4

If a committee of management governs a firm or group, can the functions be allocated to every member of that committee?

Yes, as long as the allocation remains appropriate (see Question 3).If the firm also has an individual as chief executive, then the functions must be allocated to that individual as well under SYSC 2.1.4 R, column 2 (see Question 7).

5

Does the definition of chief executive include the possessor of equivalent responsibilities with another title, such as a managing director or managing partner?

Yes.

6

Is it possible for a firm to have more than one individual as its chief executive?

Although unusual, some firm may wish the responsibility of a chief executive to be held jointly by more than one individual. In that case, each of them will be a chief executive and the functions must be allocated to all of them under SYSC 2.1.4 R, column 2 (see also Questions 2 and 7).

7

If a firm has an individual as chief executive, must the functions be allocated to that individual?

Normally, yes, under SYSC 2.1.4 R, column 2.

But if the firm is a body corporate and a member of a group, the functions may, instead of to the firm's chief executive, be allocated to a director or senior manager from the group responsible for the overall management of the group or of a relevant group division, so long as this is appropriate (see Question 3). Such individuals willnevertheless require approval by the FSA (see Question 1).

If the firm chooses to allocate the functions to a director or senior manager responsible for the overall management of a relevant group division, the FSA would expect that individual to be of a seniority equivalent to or greater than a chief executive of the firm for the allocation to be appropriate.

See also Question 14.

8

If a firm has a chief executive, can the functions be allocated to other individuals in addition to the chief executive?

Yes. SYSC 2.1.4 R, column 3, permits a firm to allocate the functions, additionally, to the firm's (or where applicable the group's) directors and senior managers as long as this is appropriate (see Question 3).

9

What if a firm does not have a chief executive?

Normally, the functions must be allocated to one or more individuals selected from the firm's (or where applicable the group's) directors and senior managers under SYSC 2.1.4 R, column 3.

But if the firm:

(1) is a body corporate and a member of a group; and

(2) the group has a director or senior manager responsible for the overall management of the group or of a relevant group division;

then the functions must be allocated to that individual (together, optionally, with individuals from column 3 if appropriate) under SYSC 2.1.4 R, column 2.2

10

What do you mean by "group division within which some or all of the firm's regulated activities fall"?

A "division" in this context should be interpreted by reference to geographical operations, product lines or any other method by which the group's business is divided.

If the firm's regulated activities fall within more than one division and the firm does not wish to allocate the functions to its chief executive, the allocation must, under SYSC 2.1.4 R, be to:

(1) a director or senior manager responsible for the overall management of the group; or

(2) a director or senior manager responsible for the overall management of one of those divisions;

together, optionally, with individuals from column 3 if appropriate. (See also Questions 7 and 9.)

11

How does the requirement to allocate the functions in SYSC 2.1.3R apply to an overseas firm which is not an incoming EEA firm, incoming Treaty firm or UCITS qualifier?

The firm must appropriately allocate those functions to one or more individuals, in accordance with SYSC 2.1.4 R, but:

(1) The responsibilities that must be apportioned and the systems and controls that must be overseen are those relating to activities carried on from a UK establishment with certain exceptions (see SYSC 1 Annex 1.1.7 R)6. Note that SYSC 1 Annex 1.1.10 R6 does not extend the territorial scope of SYSC 2 for an overseas firm.

(2) The chief executive of an overseas firm is the person responsible for the conduct of the firm's business within the United Kingdom (see the definition of "chief executive"). This might, for example, be the manager of the firm's UK establishment, or it might be the chief executive of the firm as a whole, if he has that responsibility.

The apportionment and oversight function applies to such a firm, unless it falls within a particular exception from the approved persons regime (see Question 1).

66

12

How does the requirement to allocate the functions in SYSC 2.1.3R apply to an incoming EEA firm or incoming Treaty firm?

SYSC 1 Annex 1.1.1R6and SYSC 1 Annex 1.1.8 R6restrict the application of SYSC 2.1.3 R for such a firm. Accordingly:

(1) Such a firm is not required to allocate the function of dealing with apportionment in SYSC 2.1.3 R (1).

(2) Such a firm is required to allocate the function of oversight in SYSC 2.1.3 R (2). However, the systems and controls that must be overseen are those relating to matters which the FSA, as Host State regulator, is entitled to regulate (there is guidance on this in SUP 13A Annex 2 G3). Those are primarily, but not exclusively, the systems and controls relating to the conduct of the firm's activities carried on from its UK branch.

(3) Such a firm need not allocate the function of oversight to its chief executive; it must allocate it to one or more directors and senior managers of the firm or the firm's group under SYSC 2.1.4 R, row (2).

(4) An incoming EEA firm which has provision only for cross border services is not required to allocate either function if it does not carry on regulated activities in the United Kingdom; for example if they fall within the overseas persons exclusions in article 72 of the Regulated Activities Order.

See also Questions 1 and 15.1

663

13

What about a firm that is a partnership or a limited liability partnership?

The FSA envisages that most if not all partners or members will be either directors or senior managers, but this will depend on the constitution of the partnership (particularly in the case of a limited partnership) or limited liability partnership. A partnership or limited liability partnership may also have a chief executive (see Question 5). A limited liability partnership is a body corporate and, if a member of a group, will fall within SYSC 2.1.4 R, row (1) or (2).

14

What if generally accepted principles of good corporate governance recommend that the chief executive should not be involved in an aspect of corporate governance?

The Note to SYSC 2.1.4 R provides that the chief executive or other executive director or senior manager need not be involved in such circumstances. For example, the Combined Code developed by the Committee on Corporate Governancerecommends that the board of a listed company should establish an audit committee of non-executive directors to be responsible for oversight of the audit. That aspect of the oversight function may therefore be allocated to the members of such a committee without involving the chief executive. Such individuals may require approval by the FSA in relation to that function (see Question 1).

15

What about electronic commerce activities carried on from an establishment in another EEA State with or for a person in the United Kingdom?4

4

SYSC does not apply to an incoming ECA provider acting as such.1

4
SUP 12.6.6RRP
A firm must take reasonable steps to ensure that each of its appointed representatives:(1) does not carry on regulated activities in breach of the general prohibition in section 19 of the Act; and(2) carries on the regulated activities for which the firm has accepted responsibility in a way which is, and is held out as being, clearly distinct from any of the appointed representative's other business:(a) which is performed as an appointed representative of another firm; or(b) which:(i)
SUP 12.6.8GRP
(1) Some of the controlled functions, as set out in SUP 10.4.1 R, apply to an appointed representative of a firm, other than an introducer appointed representative, just as they apply to a firm (see SUP 10.1.16 R). These are the governing functions and the customer function5. As explained in SUP 10.1.16A R and SUP 10.3.2 G respectively:255(a) the effect of SUP 10.1.16 R is that the directors (or their equivalent) and senior managers (or their equivalent) of an appointed representative,
SUP 12.5.2AGRP
8If a UK MiFID investment firm or a third country investment firm appoints an appointed representative that is a tied agent, regulation 3(6) of the Appointed Representative Regulations requires the contract between the firm and the appointed representative to contain a provision that the representative is only permitted to provide the services and carry on the activities referred to in Article 4(1)(25) of MiFID while he is entered on the applicable Register.
SUP 12.5.6ARRP
(1) 4A firm must ensure that, if appointing an appointed representative (other than an introducer appointed representative), to carry on any of the following regulated activities, its written contract prohibits the appointed representative from carrying on any of the specified activities as an appointed representative for another firm:4(a) any designated investment business for retail clients7: the prohibition must cover all designated investment business for retail clients7;477(b)
FEES 4.3.2GRP
(1) The amount payable by each firm will depend upon the category (or categories) of regulated activities it is engaged in (fee-blocks), and on the amount of business it conducts in each category (tariff base). The fee-blocks and tariffs are identified in in respect of the FCA and in respect of the PRAFEES 4 Annex 1, while FEES 4 Annex 2 sets out the tariff rates for the relevant financial year.(2) Incoming EEA firms, and incoming Treaty firmsreceive a discount to reflect the
FEES 4.3.12RRP
For an incoming EEA firm, (excluding MTF operators), 5 or an incoming Treaty firm, the calculation required by FEES 4.3.3 R is modified as follows:(1) the tariffs set out in Part 1 of FEES 4 Annex 2 are applied only to the regulated activities of the firm which are carried on in the United Kingdom; and(2) those tariffs are modified in accordance with Part 3 of and, if applicable, Part 3 of FEES 4 Annex 2.
GEN 2.2.17RRP
A general rule (that is a rule made section 138 of the Act (General rule-making power)) is to be interpreted as:(1) applying to a firm with respect to the carrying on of all regulated activities, except to the extent that a contrary intention appears; and(2) not applying to a firm with respect to the carrying on of unregulated activities, unless and then only to the extent that a contrary intention appears.
INSPRU 8.4.2GRP
The rules and guidance in this chapter are intended to promote confidence in the market at Lloyd's, and to protect certain consumers of services provided by the Society in carrying on, or in connection with or for the purposes of, its regulated activities. They do this by ensuring that the Society appropriately and effectively regulates the capacity transfer market so that it operates in a fair and transparent manner.
PERG 8.10.10GRP
Article 8(3) of the Financial Promotion Order also has the effect in broad terms that financial promotions made during a visit, call or dialogue will be solicited only if they relate to controlled activities or controlled investments of the kind to which the recipient envisaged that they would relate. In determining whether this is the case, account must be taken of all the circumstances when the call, visit or dialogue was requested or initiated. For example, a person may ask
MCOB 5.4.23RRP
Where the illustration provided to the customer does not contain an accurate quotation or a reasonable estimate of the payments the customer will need to make in connection with any tied product that the customer must take out with the regulated mortgage contract, and the customer applies for that regulated mortgage contract:(1) the firm must provide the customer with an accurate quotation as soon as possible after he has applied, and in good time before the offer document is
PERG 5.1.8GRP
Rights conferred on third parties cannot be affected by guidance given by the FSA. This guidance represents the FSA's view, and does not bind the courts, for example, in relation to the enforceability of a contract where there has been a breach of the general prohibition on carrying on a regulated activity in the United Kingdom without authorisation (see sections 26 to 29 of the Act (Enforceability of Agreements)).
APER 4.2.6ERP
Undertaking, recommending or providing advice on transactions without a reasonable understanding of the risk exposure of the transaction to a customer falls within APER 4.2.2 E.
MIPRU 5.2.3ERP
(1) A firm should:(a) before using the services of the intermediary, check:(i) the FSA Register; or(ii) in relation to insurance mediation carried on by an EEA firm, the register of its Home State regulator;for the status of the person; and(b) use the services of that person only if the relevant register indicates that the person is registered for that purpose.(2) (a) Checking the FSA Register before using the services of the intermediary and using the services of that person
MIPRU 3.1.1RRP
2This chapter applies to a firm with Part IV permission to carry on any of the activities:(1) insurance mediation activity;(2) home finance mediation activity;1unless any of the following exemptions apply:1(3) in relation to insurance mediation activity, this chapter does not apply to a firm if another authorised person which has net tangible assets of more than £10 million provides a comparable guarantee; for this purpose:(a) if the firm is a member of a group in which there
COLL 9.3.1DRP
(1) If the operator of a scheme gives notice to the FSA under section 270 of the Act (Schemes authorised in designated countries or territories) or makes an application under section 272 of the Act (Individually recognised overseas schemes), the notice or application must include the information in paragraph (4). (2) The documents must be in English or accompanied by a translation in English. (3) The documents must be certified by the operator to be true copies of the originals.